If the interest earned during the 2nd year on a certain sum is Rs. 5,520, and the rate of interest is 20% per annum compounded annually, then the sum is:​

Correct option is B

Given:

Interest earned during the 2nd year = Rs. 5,520

Rate of interest = 20% per annum

Interest is compounded annually

Find the original sum (principal).

Formula Used:

Amount after 1st year:

​$$A_1 = P\left(1+\frac{r}{100}\right)$$​​

Interest of 2nd year:

​$$\text{Interest}_{2nd} = A_1 \times \frac{r}{100}$$​​

Solution:

Given: r = 20%

Interest during 2nd year:

​$$A_1 \times \frac{20}{100} = 5520$$​​

​$$A_1 = \frac{5520 \times 100}{20} = 27600$$​​

But,

​$$A_1 = P \times 1.2$$​​

P = $$\frac{27600}{1.2}$$​ = 23000

The required sum is Rs. 23,000

Alternate Solution: